Proceed With Caution in Approving Satellite Exports to China

The U.S. satellite industry is asking the Bush Administration to
make export licensing decisions more rapidly in order to expedite
sales to and launches from China. The granting of licenses was
slowed in 1999 following allegations that export restrictions had
been violated in one launch contract and restricted technology had
been transferred to China; two companies involved in that incident
remain under federal investigation. License applications were
frozen in February 2000 after China admitted proliferating
missile-related materials, but the U.S. Department of State resumed
processing applications when China promised to halt such activity
last November. According to the satellite industry trade
association, these licensing delays and export controls cost
manufacturers $1.2 billion in contracts and 1,000 jobs in 2000
alone. One company claims that it will lose a $180 million contract
with China if its license application is not approved quickly.
Thus, pressure on the Administration to expedite export licenses
and loosen export controls is increasing.

To
ensure that U.S. security is not compromised in any way by
satellite exports to China, the Administration should adhere to the
prudent provisions of Title 15 of the National Defense
Authorization Act of 1999 (P.L. 105-261). This law contains strict
guidelines on the review and monitoring of satellite export
licenses and applications by the Departments of State, Defense, and
Commerce as well as the intelligence community. In particular, the
Defense Department, not the U.S. firm involved, is responsible for
ensuring that national security is not breached in satellite
transactions with China. For each license obtained from the State
Department, companies must make a full accounting of and get
approval for the technology that they pass to China. Such steps
allow a prudent combination of caution and fairness to be applied
to U.S. commercial satellite activity with China. The
Administration should neither delay decisions on license
applications nor rush to grant licenses to appease the industry
without assuring national security.

Satellite Launches from ChinaIndustry claims that jobs and contracts are being lost because
of the export controls are reminiscent of claims made during the
senior Bush Administration. President George H. W. Bush imposed
sanctions on China following the violent suppression of student
demonstrators in Tiananmen Square in June 1989; he later waived
them to permit the launch of American-manufactured satellites. U.S.
restrictions on satellite exports were tightened again after the
May 1999 release of a declassified House of Representatives report
on national security concerns regarding China. The Cox Committee
report detailed breakdowns in government licensing procedures and
negligence on the part of satellite companies, which may have
resulted in the transfer of sensitive technology.

President Bill Clinton weakened export
controls over satellite technology and transferred licensing
authority for satellites from the State Department to the
Department of Commerce in 1996. In March 1999, license authority
reverted to the State Department, which suspended all applications
to launch U.S. satellites aboard Chinese rockets in February 2000
amid fears that China was exporting missile-related material to
Pakistan and Iran. The Clinton Administration lifted those
sanctions on November 21 after Beijing promised to stop selling
parts and equipment for missile production to countries with
nascent nuclear weapons programs. China's promise, however,
constituted an admission that it had proliferated this technology
in the past. This forced the Administration to impose sanctions
under the Arms Export Control Act (P.L. 90-629), but it immediately
waived them. The State Department also issued an internal directive
to resume the processing of licenses for commercial space
cooperation between American and Chinese companies.

The Current License IssueThe first major license application filed after the sanctions
were waived last November is for the manufacture of a geostationary
satellite by an American company under contract with a satellite
firm in Hong Kong. The satellite is to be launched in February 2003
aboard a Chinese Long March 3B rocket provided by the China Great
Wall Industry Corporation--the same company cited in the Cox
Committee report as the recipient of illegal data in 1996. The
total cost of the project, including launch and insurance, is
around $230 million. The contract requires that the license must be
obtained within six months of January 8, 2001, or the deal will be
terminated. Another manufacturer has waited more than two years for
permission to send an already completed Chinasat 8 satellite to
China for launch. These decisions are anxiously awaited by the
satellite industry to see whether the State Department is sincere
about processing applications fairly and quickly.

Executive Branch ResponsibilitiesAs P.L. 105-261 makes clear, the Administration must balance
the interests of America's space launch industry with national
security concerns based on the best intelligence and information
available. The satellite industry is lobbying for greater freedom
and faster processing of licenses in order to remain competitive in
the world market. However, national security is a crucial
consideration when sensitive dual-use technology is involved. The
White House must ensure that the provisions of the law are followed
in the granting and monitoring of licenses, including the
submission of all requisite reports to Congress.

Though the satellite industry lobbied to
get license authority transferred back to the Commerce Department,
given the sensitive nature of the technology involved in the
engineering and launch of satellites, the State Department's
licensing authority combined with the Defense Department's approval
of a technology transfer control plan and close monitoring of all
launches is prudent to make sure that commercial interests have
been weighed against the security risk posed by each transaction.
U.S. firms choose to launch their satellites aboard Chinese rockets
because it is measurably cheaper for them to do so. For that
reason, contracts for such launches are becoming more common. To
maintain security without stifling industry competitiveness,
Pentagon representatives must be present at all commercial launches
in and technical discussions with China.

ConclusionThe satellite industry complains that the market share for U.S.
satellites declined after licensing decisions were slowed in 1999,
following the allegations of security breaches by major
manufacturers. The best thing that the government can do to remedy
this situation without compromising national security is to apply
the law expeditiously in a fair and consistent manner, allowing
businesses to adjust accordingly. A stricter export regime might
hinder the industry's ability to recover its market share, but the
worthwhile trade-off is keeping sensitive technology from
proliferating to those who would harm America.

Dr. Larry M. Wortzel is
the Director of the Asian Studies Center at The Heritage
Foundation.